CMI split-off offer

The usual deal here: Cummins Launches Exchange Offer for Separation of Atmus Filtration Technologies Inc.

Jim

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So this is a buy x shares of Cummins and short 13.5x Atmus to lock in 7% gain in 2 weeks?

I don’t think it is quite that simple: depending upon the number of shares tendered one could get way less that the $107 for $100.

“If the upper limit is in effect, you may receive less than $107.53 of Atmus common stock for each $100 of Cummins common stock tendered, and you could receive much less.”

Cheers!
Murph
BL Home Fool

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Murph,
Did you mean depending on the number of shares tendered? Since they are offering to exchange any and all shares tendered? Or do you mean the relationship of the two stock prices when the ratio is set?
Vince

Exchange Offer (okapivote.com)

*The value of Cummins common stock and Atmus common stock for purposes of establishing the exchange ratio for this exchange offer will be determined by Cummins by reference to the simple arithmetic average of the daily volume-weighted average prices (VWAP) during the Averaging Period of three consecutive trading days (currently expected to be March 7, 8, and 11) of Cummins and Atmus common stock on the NYSE. The final exchange ratio, including whether the upper limit on the number of shares that can be received for each share of Cummins, will be announced by 5:30 p.m., New York City time, on the second trading day immediately preceding the expiration date of the offer.

**The upper limit would represent a 15% discount for Atmus common stock based upon the closing price of Cummins and Atmus common stock on the NYSE on February 13, 2024.

***Aggregate" is defined as the combined total number of shares held by a beneficial owner; this includes shares held in a separate account registered to the same beneficial shareholder under the same primary tax ID. Submitted instructions for holders that beneficially own an aggregate of 100 shares or more will be subject to proration.

Yeah, last time out it was easy to wait until they announced the exchange ratio and then you could take your position(s), including shorting the receivable so that you had minimal exposure to any price movement.

Jim

Thanks, Murph, I followed the address in the release but it never got me to the offer itself. So it’s basically an odd lot approach like Bagger Dave’s to ensure your shares are converted. That or risk having some CMI you didn’t plan on.

Jim, also thanks and remember the legendary Bagger Dave’s - you got your burgers and ate ‘em too!

VInce

Was that a 5-bagger Daves in a few months or an 8-bagger? Either way, it amounted to about $100. lol

Jim

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If you cannot do this in scale or make meaningful investment or gains, why bother? It may satisfy your urge to deal with some complex math, but is it worth the effort?

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I think it was a 5 bagger - Bought 99 shares in all my accounts, my family members’ and told friends.

Based on today’s close only, they are not at that upper limit. (this is an edit - I was mistaken earlier)

Based on today’s prices an hour ago, the indicative final ratio is a little less than 12:1. Was able to buy 99 CMI and short 1195 ATMU at ETrade. We’ll see how this goes…

Vince, I set mine up today, too, and hedged the position by shorting shares of ATMU. The deal should go through by the end of next week.

Jim

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And the official statement: Cummins Announces Final Exchange Ratio of 12.0298 in Split-Off of Atmus Filtration Technologies Inc.

So based on the closing price it looks like you could make $3K, is that correct? I assume you can do only up to 99 shares and you cannot do this on multiple account on your name (like one in E*Trade, and one in IBKR, etc).

I think you find at least one or 2 such deals every year… that is impressive.

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Closer to $2k - but yes, Jim has been digging these up periodically.
Vince

I see now, E*Trade is charging borrow fee!! I don’t recollect in the past (before MS takeover) they charged for the borrow.

Yes, at the current price and now the fully certain exchange ratio, it’s priced at almost exactly a $2,500 profit. No more than 99 shares to be sure you get the odd lot priority. Otherwise, proration might be 30% or something. You have offer all your shares to get the odd lot priority.

One deal per Social Security number.

This has been a bit better than most because the CMI stock price is a bit higher than the usual here. Often you get $1,000-$1,500 or so.

Best,

Jim

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Thanks. I have shorted 1191 ATMU @ 24.15, and bought 99 CMI @ 270.4. If everything goes through that is $2400, minus any borrow fees. WOW.

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Slightly better at E*Trade (on my wife’s account), sold at 24.66 and bought at 271.13.